EUR 100.00 For Business Accounts Only

IBERIAN DAILY 31 AUGUST (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY SECTOR, FERROVIAL, TOURISM SECTOR.

MARKETS YESTERDAY AND TODAY

Europe advances, but the IBEX stagnates
European stock markets improved as the session went on, underpinned by the positive opening in the US (led by the tech sector), where the IBEX was the negative stand-out, closing with losses and still below 9,000 points. Thus, in the Euro STOXX almost all the sectors closed in positive numbers, with Media and Chemicals the best relative performers vs. the drops in Banks and Insurance. On the macro side, in Spain August’s inflation rose more than expected, whereas in Germany the rise was in line with expectations. In China, August’s PMIs were disappointing, where both the manufacturing and services data fell more than expected. In Japan, July’s industrial output slowed less than expected. In Afghanistan, US forces left Kabul, completing the evacuation.
What we expect for today
European stock markets would open flat after the disappointing PMIs released in China and the mixed closing bell seen yesterday in the US. Tourism companies could be hit by the new EU proposal to restrict non-essential travel from the US. Currently, S&P futures are up +0.28% (the S&P 500 ended unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 16.19). Asian markets are trading with mixed results (China’s CSI -1.1% and Japan’s Nikkei +1.2%).
Today in the euro zone we will learn August’s inflation and in Germany August’s unemployment. In debt auctions: Netherlands (€ 2.5 Bn in 4Y bonds) and Italy (€ 5.75 Bn in 5Y and 10Y bonds and € 2 Bn in 8Y FRN).


COMPANY NEWS

TOURISM SECTOR
Yesterday the European Council decided to once again recommend restrictions on non-essential travel from the US to Europe. This would be a non-binding recommendation that each country will decide how to implement. EU sources indicate that this would affect unvaccinated citizens and that the new proposal of restrictions (which had been lifted since June) is due to the rise in delta variant cases and to the slow rate of vaccination.
News with a small negative impact. On one hand, the US still has restrictions on travel from the UK and EU, and thus this measure, which additionally is non-binding, will have a relatively small impact on air or tourism companies. Furthermore, if the measure is confirmed to only affect unvaccinated citizens, the impact is limited, as 52% of the US population is already fully vaccinated.
With this in mind, this news should have a negative (and limited) impact on companies linked to tourism such as Amadeus, Meliá, NH, Ferrovial or Aena, and a higher impact on IAG, with the most negative factor being that it opens the door to the extension of restrictions beyond expectations (that were not expected to remain in force in the 3Q) due to the delta variant and to the slowdown of the vaccination pace in the US given the opposition of part of the population.
Note that the US market accounts for 17% of IAG’s sales on a normalised year and 30% of capacity. This geographic segment is particularly relevant due to British Airways’ leading position in the North Atlantic, as it has higher unit revenues (thanks to a greater weight of the business segment), and therefore, higher returns backed by business travel.